Facebook finally added Graph Search to its iOS app last week. Source: Facebook.
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Mark Zuckerberg sees Facebook Search growing to become as big as Google in the next five years. The 30-year-old CEO believes Search is one of the next batch of products his company can grow to 1 billion users, which is surprising considering how little attention that diminutive bar at the top of the page gets.
Zuckerberg's Search ambitions led to the strategic decision to ditch Microsoft Bing over the weekend to focus solely on content from Facebook. The implication is that Facebook is working on its own way to organize Web pages, perhaps using social signals to personalize search results.
Any progress toward a more robust search engine would move Facebook closer to capturing a portion of the estimated $56 billion industry dominated by Google.
Nobody is really using Facebook as a search engine
The good news for Microsoft is that hardly anyone was clicking on Bing search results when they popped up in the 1 billion searches Facebook users make every day, according to Zuckerberg.
Bing is ranked 19th on the list of websites receiving referral traffic from Facebook. Google's YouTube takes the top spot with 16.6% of traffic leaving the site (which is why Facebook has become increasingly focused on video lately). Even Google.com receives more Web traffic from Facebook, taking 1.95% traffic share compared to 0.52% for Bing.
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In other words, users might be searching for things on Facebook, but they aren't particularly interested in searching the entire Web from Facebook. If Zuckerberg is serious about taking on Google or Microsoft, his company needs to show users the value it can provide in linking them to things outside of Facebook's walled garden besides YouTube videos.
Facebook's potential in Search
Search is slowly migrating toward mobile. In case you haven't heard, Facebook absolutely dominates time spent on mobile. It has by far the most popular app, with an install base covering 72% of U.S. smartphone owners. The average smartphone owner with the Facebook app installed spends nearly 40 minutes using it every day.
Facebook already has the advantage on mobile over Google and Microsoft. It doesn't need to convince users to download an app or change their browser settings to get them to use its Search product. They already have the app, and they are already searching. Facebook just needs to nudge users to use the product more while continuously improving it to rival the quality of Google and Bing.
eMarketer expects mobile search ad spending to top $9 billion this year, and increase to $26.5 billion by 2018. Considering Facebook's experience in monetizing mobile users successfully, the early version of the mobile search product the company rolled out last week has significant potential to capture the next $15 billion to $20 billion in search advertising spending.
Serious about Search
Zuckerberg's comments on Facebook's most recent earnings call regarding Search caught me by surprise. Considering that Graph Search is nearly 2 years old and has hardly made any progress since its initial rollout, the idea that Search could have1 billion users seemedfar-fetched.
But just a couple months later, Facebook's prospects with Search look much more promising. The company can't court 1 billion users without expanding Search's reach beyond Facebook's own content, but it would not abandon Bing if management did not think it could do that on its own.
In the near term, focusing Graph Search on content within Facebook ought to boost engagement, as will the rollout of Graph Search to iOS (with Android supposedly upcoming). Additional progress in Search represents a huge revenue opportunity, as Facebook today does not monetize any of those 1 billion daily searches.
Over the next five years, analysts see Facebook growing earnings over 30% annually. But with a net income base of just $2.75 billion over the last 12 months, Facebook has potential to grow much faster by improving and monetizing Search. Even a 10% share of the search market would add several billion dollars of high-margin revenue to the income statement.
The article Facebook Inc (FB) Is Getting Serious About This $56 Billion Market originally appeared on Fool.com.
Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google (A shares), and Google (C shares). The Motley Fool owns shares of Facebook, Google (A shares), Google (C shares), and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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